more on "debt virus"

["William B. Ryan" <william_b_ryan@xxxxxxxxx>]

I have inserted some comments below in reply to Dan Parker [in reply] and a brief reply toward the end to Wally Klinck.  Bill
--------------------


From: "Dan Parker" <dan.parker@xxxxxxxxxxxxxxx>
CC: "'Victor Bridger'" <socred@xxxxxxxxxx>;"'William B. Ryan'" <william_b_ryan@xxxxxxxxxx>;"'Michael Stephen Lane'" <OAssoci508@xxxxxxx>
To: "'Wallace M. Klinck'" <wmklinck@xxxxxxx>
Subject: RE: Compound Interest: Wally answers.
Sent: 1/28/2003 11:16:37 AM


--------------------------------------------------------------------------------


> -----Original Message-----
> From: Wallace M. Klinck [mailto:wmklinck@xxxxxxx]
> Sent: Tuesday, January 28, 2003 2:32 AM
> To: Dan Parker
> Cc: Victor Bridger; William B. Ryan; Michael Stephen Lane
> Subject: Re: Compound Interest: Wally answers.
>
>
> Hello Dan,
>
> Thanks for your message and referral to the Nesara site and
> its discussion
> of  interest, compound and simple, which I have read.  This
> also led me to
> Martin Hattersley's site and articles, including that on
> Frederick Soddy.
>
> I do not think interest interacts with the A + B Theorem, as
> it were, apart
> from the Theorem, which is a universal or global, inclusive statement
> regarding the overall economic monetary price-system.  Bank
> charges are
> explicitly included by Douglas as a part of a given
> business's  B (outside)
> payments which do not distribute income, being spent A
> (inside) payments
> which never become income again.  The A (inside) payments of
> that business
> are, of course, income distributed at the time of payment.
> Do you have any
> problems with this?

None whatsoever.  The compound interest math takes place
inside the bank charges component of the B payments.
-----------------------

[in reply to Dan]  Presumably the "compound interest math" refers to the compound interest formula.  The formula has no relevance to the system of creditary money.  The comparison to exponentially multiplying pond scum is completely fallacious.  See further comments below.  Bill
--


Thank you for the excellent reminders of the other factors
below.  Again, I do not see it as an either/or question,
but one of both issues.  If you do the math for a system
in which 95% of money is issued as debt at compound interest;
and in which no money is cancelled out of existence, you
will see debt will climb, through the increase in the money
supply that would still be needed for a growing economy
(and population so far).
-----------------------

[in reply to Dan]  Debt exists because in a free society we have the right to contract for future performance.

The statement above that "95% of money is issued as debt at compound interest" is false because there is no independent reality to "compound interest."  Any simple rate of interest can be expressed as a compound rate, and any compound rate can be expressed as a simple rate.

For example, if the contract calls for rate of interest of 12% compounded annually and payable annually, the compound rate of interest and the APR (effective annual percentage rate) are both 12&.

If the contract calls for a rate of interest of 11.335% payable annually but compounded daily, the APR is again 12%.

The law requires that most contracts be stated in terms of the APR.

Let's say supposedly that the interest rate is zero, but there are fees or service charges that have to be paid at the beginning of the loan, periodically, or at the end.  If you are required to pay $120 annually in fees the APR is 12%.

The false assumption--and it is a whopper of a false assumption--is that the money supply is a debt that is not being amortized, so that interest accrues to principal and interest is charged on interest.

The reality is that there are many overlapping loans that are continuously being amortized.  It translates into a simple rate of interest for the economy as a whole that is charged by the financial sector to the rest of the economy for services rendered.  Bill
--

Compensated prices would still
be very problematic. Again, compound interest is positive
feedback; positive feedback is inherently unstable.
-----------------------

[in reply to Dan]  First, interest is not "positive feedback."  Second, even if it were, there's nothing "inherently unstable" about positive feedback.  Where in the world did you get that idea?

An example of positive (the conventional term is "regenerative") feedback that we encounter numerous times daily to our benefit is the electronic oscillator.  There's nothing unstable about it.

Feedback is a phenomenon, an effect.

It may be that it is not the desired effect in particular circumstances, such as when a bridge begins to resonate at its harmonic frequency, tearing itself apart.  In that case it is not the feedback that is unstable but the bridge's flawed design.  Bill
--


  This
basic thermodynamics is as much a fact of math and life
as energy is to wealth production.  There is no getting
around its import.  If one is concerned about those who
concentrate on interest to the exclusion of other factors
causing a shortage of purchasing power, saying compound interest
is largely irrelevant does not make the case regarding the
valid other shortcomings.  It will tend to unfairly discredit
the thesis, for anyone who knows the compound interest math.
(Saying compound interest is just a function of time is not
to discredit its import, since this statement only makes sense
where loans are repaid immediately).

Again, thank you for the good reminders, clear elaborations,
and a reiteration of my favourite quote by Soddy. I am super
busy now, working in the oilfields while helping develop an
international change vehicle; so please excuse me if I don't
get involved in any discussion which may follow this quote.

J.B. O'Donnell sent me a paper, Three Steps to Freedom, which
also has some good math.  He came to basically the same conclusion
as social credit re: debt free injections of money, even though
he stated he hadn't studied social credit when he did his paper.
He said others had also pointed out the similarity of his results
and those of C. H. Douglas.  Key words should get you to this work.

rgds
Dan Parker
>
> Sometimes, Douglas observed, if you struggle too much for
> "justice" you may
> actually miss achieving it.  However, one might dislike
> (disapprove, detest
> or even hate), rail against, condemn or legislate against the
> practice of
> usury, one should not neglect to seek out the underlying
> factors which make
> it possible and prevalent.  One can pass legislation
> outlawing a physical
> disease--but it does not accomplish one iota of good if you
> do not discover
> the organism or factors that cause and/or allow it and deal with these
> fundamental factors.
>
> In the recall of bank loans via consumer purchases, money in
> respect of both
> capital and consumer goods is cancelled without
> discrimination--although
> capital goods last physically for a long time.  Money is
> cancelled at a rate
> which is too rapid.  This factor is paramount and as Arthur
> Brenton (Editor
> of  The New Age) declared in his book The Veil of Finance,
> "The fact that
> such actual cancellation of money goes on as an invariable practice of
> modern banking is the crux of the whole economic problem, and
> no person who
> does not grasp it and its significance is in a position  to
> contribute any
> assistance whatever to a solution to our industrial and
> social problems."
> The deficiency of purchasing-power which it causes creates
> the need for
> exponentially increasing debt, which "justifies" an economy
> which features
> increasing usury or the taking of interest.  The source and
> manner of issue
> for production loans is discussed  in Douglas's works.
>
> In a global sense, Social Credit fully balances consumer
> income with total
> costs of each production cycle, thereby, entirely eliminating
> the need for
> consumer debt and the interest that currently attaches to it.
-----------------------

[in reply to Wally]  The need for consumer credit will not be eliminated.  Consumers should have the right to balance their current consumption with their lifetime income, so you don't have to, for example, work a lifetime to save the money to purchase a house.  Consumer credit allows you to live in it now and pay for it over your lifetime.  Likewise for cars and college educations.

What will be eliminated is the incessant imperative for firms to shift debt from their backs onto the backs of consumers to inflate fictitious profits in payment for chattels that are headed for the landfill.  Bill
--


>  This enables
> the complete liquidation of industrial debt via consumer
> expenditure and
> obviates the necessity of passing over unliquidated costs to become
> incorporated in national debt in order that the system might
> "carry on" (in
> the inflationary, oppressively taxing and friction generating
> way that it
> does).  In Social Credit, however, from an accountancy point
> of view, the
> National Debt becomes a National Credit.  Rather than being a
> source of debt
> and interest against the public, it becomes the basis of the
> payment of
> National Dividends to all.
>
> Proposals which see the limitation or control of interest
> charges as the
> solution to the "economic problem" do not radically deviate
> from orthodox
> practice in that they make no provision for such Dividends payable to
> compensate for the effects of  replacement of  labour by
> capital.  They do
> not recognize the right of the individual to participate in
> this resultant
> Cultural Inheritance independent of  his or her direct labour
> input and
> continue, thereby, essentially to proceed according to the
> dictates of the
> orthodox "work ethic."  Nothing really revolutionary here in
> the sense of
> being a real challenge to the established order.
>
> According to Gorham Munson, in Aladdin's Lamp, Frederick
> Soddy had moved
> more and more to advocacy of distribution of finished wealth
> directly to the
> consumer--to the point of declaring in 1943 that "Science
> without Social
> Credit is sheer suicide."
>
> Sincerely
> Wally
>
> ----- Original Message -----
> From: "Dan Parker" <dan.parker@xxxxxxxxxxxxxxx>
> To: "Wallace M. Klinck" <wmklinck@xxxxxxx>
> Sent: Monday, January 27, 2003 10:43 PM
> Subject: Compound Interest
>
>
> > Wally, here is a bit more on compound interest,
> > and how it might interact with the A + B
> > theorum.  ["Theorem"--Wally]
> >
> > excerpt from e-mail
> >
> >
> > Regarding the non-fraudulent nature of compound interest,
> we agree from
> > a strict "legal" and "ethical" perspective, many people
> would argue that
> > no contention or fraud exists. However, many people also
> believe that
> > fractional reserve banking is fraudulent. Yet, that is
> exactly the focus
> > of the NESARA proposal. NESARA understands that what is
> "ethical" and
> > "legal" is not always moral. Of course, what is defined as
> moral is just
> > as subjective as defining what is ethical or legal, so NESARA uses a
> > different approach and evaluates the challenges of compound interest
> > from a systems theory perspective. From that perspective, compound
> > interest is inherently unstable and no monetary system can
> survive in
> > perpetuity as long as compound interest exists. That is why NESARA
> > changes the rules about how monetization fees can be calculated.
> >
> > We have available an essay explaining the problem of
> compound interest,
> > but because the essay dabbles in mathematical equations, we
> have never
> > posted the document to the web site. However, with the
> prompting of your
> > email, we have decided to post that essay. With the NESARA proposal
> > gaining interest we hope the essay will provide foundations for some
> > good discussions. You (eventually) will be able to find the essay at
> > http://nesara.org/articles/new_equations.htm .
> >
> > Dan



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